In any country, citizens pay taxes to contribute their fair share to the national economy, health of the government, state services, and their community’s overall well-being. However, with a significant chunk of your income dedicated to tax, it is only natural to wonder where does tax money go exactly?
Where Does Tax Money Go?
There are six primary ways in which the government applies tax dollars to meet the needs of its citizens.
1. Social Security
According to one survey, over 64 million US citizens received social security benefits in June 2020. The number accounts for 1 in every 6 US residents. It is crucial to understand that social security is more than a retirement program. It also provides access to disability insurance protection and life insurance – none of which is an inexpensive affair.
2. Health Programs
Tax dollars are leveraged to fund health programs that aid in providing healthcare services to the citizens. Some health programs funded by tax money include Medicare, Medicaid, and Children’s Health Insurance.
3. Military
National defense and security is another central area funded by tax money. The taxes you pay are used to protect your homeland. Taxes are used to support different security-related activities to effectively protect against internal and external threats to American sovereignty.
4. Veteran Benefits
Tax money goes to military veterans who served in the armed forces. According to the US Census Bureau, there were over 18 million veterans in the US in 2019. Your income tax helps cover their medical care, education, and pension.
5. Interest on the National Debt
It is no secret that the government acquires national debts that are paid off with your tax dollars. In February 2021, the public debt of the US was estimated to be around 27.9 trillion dollars. Consequently, interest payments claim a considerable portion of the federal budget.
6. Government Programs
This category includes an exhaustive list of programs initiated to facilitate the needs of citizens. For example, educational programs, such as Pell Grants, student aid, work-study programs, and other educational initiatives are funded through your taxes. Similarly, food and agricultural programs and benefits like the National School Lunch Program or Federal Crop Insurance receive tax money.
Never Overpay Your Taxes
When you know where tax money goes, it becomes easier to see the bigger picture. However, while tax money is essential for the state, you do not want to overpay your hard-earned money. Unfortunately, every year, taxpayers voluntarily hand over millions of dollars by failing to claim credits, deductions, or making mistakes on their returns.
Make sure you do not make the same mistakes. A better approach is to hire a tax professional for individual tax preparation. Professionals can streamline your tax filing process, review your return, and help detect discrepancies that can cost you more.
Book a consultation appointment at Windes to learn more and explore your options.
For questions or more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).